Sanofi-Aventis (NYSE: SNY) recently announced it has established a regional R&D center in Shanghai. Unlike many of its big pharma competitors, Sanofi-Aventis is not building a lab and hiring scores of scientists to work exclusively on S-A projects. Instead, the company is focused on developing collaborations, a strategy that allows it to build on China’s innovative biopharma culture.
The partnership approach has two distinct advantages, according to Thomas Kelly, General Manager for Sanofi-Aventis China. “Firstly we have the opportunity to reallocate our resources and focus on multiple collaborations. Secondly we\'re working with scientists who are also entrepreneurs at the same time, and they probably don\'t like working in a large company in very rigid environments. Our goal is to leverage the innovation in the basic research in China and combine it with our expertise,” he said.
Kelly’s comments were contained in an interview published by The Shanghai Daily (available here).
Kelly went on to say that the partnership strategy confers another benefit. By collaborating with China companies, Sanofi moves toward its goal of addressing medical issues that are important to China, replacing a Western-centric outlook with one that is more global in scope.
Sanofi is deeply committed to China, averred Kelly, and it has implemented a long-term strategy to be successful there. Other companies, he said, are concerned about balancing risk and reward. But at Sanofi, “We never talk about the risk because of the high quality of our Chinese strategy.”
Change and fragmentation are two important characteristics of the China market, according to Sanofi-Aventis’ China General Manager. To take advantage of a market that is evolving quickly, a company must be able to make decisions quickly. Kelly believes his access to top management gives him the ability to do that.
Kelly also pointed out that no company has more than a 2% share of the China biopharma market. That means Sanofi cannot identify a single company as its major competitor. Instead, it must look at the market as a whole. Overall, Sanofi is the number one multinational biopharma in emerging markets, showing its commitment and its expertise in meeting global needs. “No country is too small for our presence,” he said.
China’s biopharma scene is famously fragmented, with over 3,000 companies and 60 enterprises devoted just to the vaccine sector. As these companies consolidate, Kelly sees increasing opportunities for partnerships.
In terms of challenges on the distribution front, China represents the second-largest consumer health care market in the world, with 200,000 retail pharmacies, 27,000 hospitals and a developing system for rural health care delivery, a diversified landscape. Kelly believes the internet may become an increasingly important means of delivering drugs to China’s populations.
“To be successful in China and serve a large population, there is no one fixed business model anymore. Companies have to be very agile and be able to execute multiple business models. In many cases we will have to identify new partnerships with Chinese institutions, companies and the government because we can not do this alone,” declared Kelly.
So how is the implementation of Sanofi-Aventis’s strategy proceeding? Kelly expressed optimism, though he was not particularly specific. “We\'re currently in talks with different companies in different regions and provinces in an effort to find new partners,” he said.
“In terms of building partnerships, it\'s sometimes difficult for both parties to define their strategic visions and find alignment in a relationship,” Kelly continued. “Most companies in the past 10 years came to China by establishing joint ventures with local ones, adhering to regulatory rules. They often didn\'t come together because they shared the same vision and or similar strategies.”
That era is past. Establishing a partnership built on a shared vision is the hallmark of successful collaborations. But it requires flexibility on the part of both sides: “At the end of the day, if you want to really expand with multiple business models, not only with the 2% market share, then you have to be very open-minded. That is a key skill for managers at multinational drug companies as well as Chinese ones,” he concluded.